EBay sells big hunk of Skype

SAN FRANCISCO

By Jon Swartz, USA TODAY

Was the Skype the limit for eBay?

Online auctioneer eBay ebay on Tuesday said that it is trading control of the online telecommunications service for about $2 billion, radically reducing its stake in a company whose acquisition raised eyebrows among analysts.

EBay said it is selling 65% of its stake of Skype to a group of private investment funds, including Andreessen Horowitz, the venture firm recently established by Web browser pioneer Marc Andreessen. The deal, which values Skype at $2.75 billion, is expected to close later this year.

EBay bought Skype for $2.6 billion in 2005.

The deal lets eBay concentrate on its profitable PayPal electronic-payments service and its flagship auction service.

"It's a win-win-win for eBay, Skype and eBay shareholders," eBay CEO John Donahoe said in a phone interview. "Skype is a strong stand-alone business, but it does not have synergies with our e-commerce and online-payments business."

Shares in eBay dipped 2%, to $21.68, on Tuesday. The company's stock has steadily improved since July, when it hovered around $16.

The move came as no surprise to analysts who follow the company. In April, eBay said it would spin off Skype through an initial public offering next year.

When it acquired Skype four years ago, eBay envisioned its auction buyers and sellers using the service, but it didn't pan out. EBay took a $1.4 billion write-down on Skype in 2007.

"Skype is a real business, but I still wonder how technologies between (eBay and Skype) integrate," says Peter Falvey, co-founder of Revolution Partners, an investment firm that specializes in tech companies. "The (2005) deal was a head scratcher."

Still, Donahoe and eBay still see vast potential in Skype. In retaining a slice of Skype, eBay remains a major player in the multibillion-dollar market for Internet-based voice services.

Donahoe says eBay's 35% share of Skype could eventually be worth more than $2.75 billion.

Skype is wildly popular among people who regularly make international calls because it offers cheaper rates by sending voice data over the Internet. It accounted for 8% of international calling traffic last year, according to TeleGeography Research.

Skype's revenue last year was $551 million, up 44% from 2007. As of June, it had 481 million registered users, up 42% from a year earlier.